He had only gone a few steps when he heard some one calling him from behind. On turning back he was much surprised to see that the monster dragon had entirely disappeared and in its place was a strange-looking man, who was bowing most ceremoniously to the ground. His red hair streamed over his shoulders and was surmounted by a crown in the shape of a dragon's head, and his sea-green dress was patterned with shells. Hidesato knew at once that this was no ordinary mortal and he wondered much at the strange occurrence.

—"My Lord Bag of Rice,"
Yei Theodora Ozaki

Which element of a folktale is included in this excerpt?

characters with exaggerated abilities
a lesson about human behavior
details changed by different storytellers
characters who play tricks

characters with exaggerated abilities

The element of a folktale included in this excerpt is "characters with exaggerated abilities."

The element of a folktale included in this excerpt is characters with exaggerated abilities. In the passage, the monster dragon transforms into a strange-looking man with red hair and a crown in the shape of a dragon's head. This character's appearance and transformation indicate supernatural or extraordinary abilities, which is a common element in folktales where characters possess exaggerated powers or traits.